PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: 66445
(The report # is automatically generated by IDU and should not be changed)
Project Name
Region
Country
Sector
Lending Instrument
Project ID
Borrower(s)
China Power Sector Transformer Efficiency Program
EAST ASIA AND PACIFIC
China
Energy (100%)
Carbon Finance
P116852
N/A
Implementing Agency
Environmental Screening
Category
Date PID Prepared
Estimated Date of Appraisal
Completion
Estimated Date of Board
Approval
Estimated Date of ERPA
Signing
The State Grid Corporation of China (SGCC)
[ ]A [X]B [ ]C [ ]FI [ ]TBD (to be determined)
I.
Introduction and Context
A.
Country and Sector Issues
January 12, 2012
January 15, 2012
N/A
January 20, 2012
1.
For over thirty years, China’s rapid economic growth has been overly dependent on the
consumption of fossil energy resources. Reflecting the rapid growth of the country’s economy,
energy consumption in China had increased, on average, at a rate of 5.79 percent per annum over
the past 30 years rising from 600 million tons of coal equivalent (tce) in 1980 to 3,250 million
tce in 2010.
2.
Energy consumption in China’s electric power sector is largely dominated by coal, which
accounted for around 81 percent of electricity generation fuel mix in 2010. Annual coal
consumption in the electric power sector rose more than 8 times since 1980 and up to 1.6 billion
tons, accounting for nearly a half of the total coal production in the country in 2010. The reliance
of the power sector on coal has contributed substantially to the rapid growth of GHG emissions
in China.
3.
The power sector, however, has made significant efforts in improving its energy
efficiency. Over the past 30 years from 1980 to 2010, the efficiency of China’s power generation
sector had increased by nearly 20 percent. The transmission and distribution (T&D) losses had
also reduced from 8.93% to 6.49% during the same period of time.
4.
The State Grid Corporation of China1 (SGCC) owns and operates most of the power
transmission and distribution networks in China. Its service area covers 88 percent of the
national territory. Currently, the losses of SGCC’s T&D network are about 6.1 percent 2 of
electricity sold, higher than the average T&D loss rate of developed countries in Europe which is
estimated at around 4 percent. While this difference in loss rates may seem small, as the total
electricity sold by the SGCC is huge, the electricity losses incurred in the SGCC’s T&D systems
are significant. In 2008, SGCC sold 2,124 TWh of electricity. With a loss rate of 6.1 percent, the
total T&D losses were estimated at around 136 TWh4, more than the total electricity sold
annually in most of the developing countries.
5.
According to the SGCC’s statistics, most of the T&D losses incurred in the distribution
systems where hundreds and thousands of inefficient distribution transformers with obsolete
technologies are still operating. Most of these transformers were installed in 1980s and 1990s.
The loss rates of these transformers are usually at least 30 percent higher than those of the most
efficient transformers currently available in the market. As most of these inefficient distribution
transformers still have 5 to 10 years of technical life and are embedded in hundreds of
distribution networks almost all over the country, without a programmatic intervention and
proper financial incentives, it is very difficult for the SGCC to early retire these transformers for
efficiency improvement of its T&D systems.
B.
Rationale for World Bank Involvement and Contribution to Sustainable
Development
6.
As part of the Bank’s efforts to assist the Government of China (GoC) in improving
energy efficiency and reducing GHG emissions in China, the proposed project was initiated and
identified by several rounds of discussions between the Bank team and the management of the
SGCC. It provides the Bank a unique opportunity to:

Support the largest inefficient power distribution transformer early retirement program in the
world with a programmatic carbon finance program. The major objective of the program is to
improve the energy efficiency and reduce GHG emissions;

Assist SGCC to design and implement a programmatic carbon finance program to support a
large number of small and decentralized energy efficiency improvement sub-projects in
power sector. If implemented successfully, the project would be first nation-wide
programmatic Clean Development Mechanism (CDM) activity in China.

Add a new dimension of the Bank’s assistance program in improving energy efficiency by
re-engaging the power sector, which the Bank had large and successful lending and technical
programs in 80s and 90s.
SGCC’s core business is to build and operate power grids and sell electricity to consumers in 26 provinces, and
large municipalities. It has 1.5 million employees and serves over 1 billion people in China.
2
SGCC’s T&D loss rate is slightly lower than the national average.
4.
Losses of Electricity Energy =[ electricity sold/ ( 1- loss rate%) ] x loss rate%
1
7.
The Bank, as the trustee of various Carbon Funds, is a world leader in mitigating climate
change via market-based emission reduction purchase transactions through the CDM. The
Bank’s successful and close working relationship with China’s power sector in the past and its
proven track records in conducting CDM based carbon transactions have uniquely positioned the
Bank as the best partner of the SGCC in preparing and implementing the proposed project.
8.
The proposed program falls under the small-scale CDM Program of Activities (PoA) and
applies the approved methodology of AMS II.A: Supply side energy efficiency improvements –
transmission and distribution. The PoA, titled “SGCC In-advance Distribution Transformer
Replacement CDM Programme” (hereinafter referred to as SGCC DT PoA, or the PoA) was
registered at the CDM Executive Board on February 12, 2011. This arrangement allows
subprojects, individually or as groups, to be added as CDM Program Activities (CPAs) under the
PoA on a rolling basis, upon submission of adequate documentation. Monitoring data for
activities under each of the programs will be verified periodically by a Designated Operational
Entity (DOE) and subsequently undergo certification and issuance by the CDM Executive Board.
II.
Proposed Development Objective(s)
9.
The objective of the China Power Sector Transformer Efficiency Program (the Project) 3
is to mitigate greenhouse gas emissions of China’s power industry by reducing distribution
system losses. This will be accomplished through the expanded adoption of non-mandatory
energy efficient transformers as part of sector modernization in distribution networks of SGCC.
To ensure adequate scale for national impact and to place the carbon finance transaction on a
financially viable footing, the Carbon Finance Operation will pool a number of replacement
activities under the distribution networks of 15 provincial subsidiaries of SGCC in a single
agreement and SGCC as intermediary is responsible for managing the carbon finance
transaction.
10.
The key project performance indicator is the actual Emission Reduction (ERs) induced by
the replacement of more efficient transformers and verified by an independent verification entity.
III.
Project Description
11.
SGCC has identified about 53,000 inefficient Type 7 and 8 distribution transformers to be
replaced with more efficient Type 11 and Type 15 transformers from 2011 to 2016, which are
covered by the PoA. Of which about 37,000 transformers will be implemented from 2011 to
2013 and are included in the Project. These transformers are operated at 6 kV and 10 kV, a low
voltage level managed by SGCC. The yearly implementation plan is illustrated in Table 1.
The Project is implemented from 2011 to 2013, covering part of the PoA, titled “SGCC In-advance Distribution
Transformer Replacement CDM Programme” which was registered at the CDM Executive Board on February 12,
2011.
3
Table 1. Replacement Plan by SGCC under the PoA
2011
1,100
5,094
the Project
2012
2013
Subtotal
1,100
17,876
13,067
5,834
2014
CPA #1
CPA #2
12,782
CPA #3
13,067
CPA #4
5,834
CPF etc.
5,888
Total
6,194
25,849
5,834
5,888
37,877
Cost Estimate
(US$ million)
48.2
251.2
64.4
65.2
363.9
Note: Implementation period of the PoA is from 2011 to 2016.
Source: SGCC
post-2013
2015
2016
Subtotal
4,742
4,742
5,256
5,256
15,886
15,886
51.7
58.0
174.9
12.
Total investment: This Project involves early retirement of around 37,000 low efficiency
Type 7 transformers in 15 provincial distribution networks of the country. On average the total
investment (inclusive of purchase of equipments, installation, and pre-operative expenses) ranges
from about US$ 3,676 for a Type 11 transformer to around US$ 5,882 for a Type 15 distribution
transformer. The cohort of high efficiency transformers to be included in the program is expected
to mainly comprise type 11 and type 15. The total capital investment of the Project is estimated
at US$ 363.9 million.
13.
Sources of Funding: The SGCC is responsible for arranging the source of financing of
the subprojects. Program financing is derived 100 percent from equity financing. The financing
for the first CPA of 1,100 high efficiency distribution transformers had been secured from the
SGCC by the end of 2009 and the replacement of the first 1,100 high efficiency transformers in
CPA#1 was completed by November 2011. The emission reductions from the implementation in
2011 will be credited on retroactive basis.
14.
Purchase of Emission Reductions. The PoA arrangement allows subprojects, individually
or as groups to be added as CPAs under the program on a rolling basis, upon submission of
adequate documentation. Total four CPAs are planned under the Project. Monitoring data for
CPAs under the program will be verified periodically by a Designated Operational Entity hired
by the Bank, and subsequently undergo certification and issuance by the CDM Executive Board.
The World Bank, acting as Trustee of the Spanish Carbon Fund (SCF), will purchase the
successfully Certified Emission Reductions (CERs) through a single Emission Reduction
Purchase Agreement (ERPA). The quantity of CERs to be contracted is estimated to be 85,000
tons of carbon dioxide equivalent (tCO2e). generated from 2011 to 2013. The estimated value of
the purchase is approximately US$ 0.91 million.
IV.
V.
Safeguard Policies Triggered
Safeguard Policies Triggered
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Cultural Property (OPN 11.03)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
Yes
X
No
X
X
X
X
X
X
X
X
X
Project Financing
Source
Project Proponents
IBRD/IDA
Financing Plan (US$ million)
Local
Foreign
363.9
0.0
0.0
0.0
Total (US$ million)
363.9
0.0
VI.
Contact point
World Bank
Contact: Ximing Peng
Title: Senior Energy Specialist
Tel: 5788+7752 / 86-10-5861-7800
Email: xpeng1@worldbank.org
Location: Beijing, China (IBRD)
Borrower/Client/Recipient: People's Republic of China Represented by Ministry of Finance
Implementing Agency: The State Grid Corporation of China (SGCC)
Contact: Mr. Li Zengbin
Tel: 86-10-66597065
Fax No.: 86-10-66597762
Email: zengbin-li@sgcc.com.cn
For more information contact:
The InfoShop
The World Bank
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Washington, D.C. 20433
Telephone: (202) 458-4500
Fax: (202) 522-1500
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